The Motley Fool: Verizon Communications for income

Verizon Communications’ (NYSE: VZ) mobile and broadband businesses generate lots of recurring revenue as customers pay their bills. That provides the telecom giant with funds to expand its 5G and fiber networks and support its high-yielding dividend. The company expects to generate $17.5 billion to $18.5 billion in free cash flow this year after investing a similar amount in capital projects. That’s plenty of money to cover the roughly $11 billion per year Verizon spends on its lucrative dividend, which recently yielded 6.3%.

The company uses the cash it retains to strengthen its solid balance sheet. That gives it the financial flexibility to make acquisitions as the right opportunities arise. Last year, it agreed to acquire Frontier Communications in a $20 billion deal. The transaction will significantly enhance and streamline Verizon’s fiber operations, generating $500 million or more in projected annual cost savings.

Verizon’s growing business and strong free cash flow put it in an excellent position to continue increasing its high-yielding dividend.

Verizon’s stock may not grow rapidly, but it can still grow. The company is a leading telecom provider, and over time, consumers will upgrade their phones and plans, which can spark more revenue growth in the future. Buying Verizon stock today could prove to be a good move for the long term. (The Motley Fool recommends Verizon Communications.)

Ask the Fool

Q. A company I’m interested in has filed for bankruptcy protection, and its stock has crashed. Would it make sense to invest in it now, at a low price? – G.C., Warsaw, Indiana

A. No, no, no – for a variety of reasons. First, a company filing for bankruptcy is a company in trouble. Why invest in that? When a company files for bankruptcy protection, it typically gets some time to reorganize and to try to pay off its creditors as much as it can. It might sell off some assets to pay holders of its secured debt, and it might negotiate with holders of its unsecured debt – perhaps offering less than what’s owed, and maybe also offering shares of newly minted stock.

In most bankruptcies, holders of the company’s common stock end up with little or nothing, with their shares of stock essentially discontinued. Many companies emerge from bankruptcy with new shares of stock, leaving the old ones worthless (or nearly so).

Q. I know that Google (now part of Alphabet) owns YouTube. What other businesses or brands are parts of other companies? – T.S., Norwalk, Connecticut

A. There are far too many to name, but here are some examples: Google also owns Nest and Fitbit, while Microsoft owns LinkedIn and Activision Blizzard; Amazon.com owns Whole Foods Market, Ring and Zappos. PepsiCo owns Quaker Oats and Gatorade. Comcast owns NBCUniversal and DreamWorks Animation, and Meta Platforms owns Facebook, Instagram and WhatsApp. Warren Buffett’s Berkshire Hathaway owns Dairy Queen, Fruit of the Loom, See’s Candies, Pampered Chef, GEICO and the BNSF railroad.

To find out about any particular company (or division or brand), you can check out its website, search online or even call it and ask.

My smartest investment

My smartest investment move was buying 12,000 shares of Amazon.com in 1999 and selling them in 2002 for an $800 profit. – W.S., online

The Fool responds: We hope you’re pulling our leg and that you’ve made even smarter investment moves since then. You did make a profit, which is certainly good. But as you surely know, had you hung on to those shares – or even a portion of them – you might be living on easy street.

Shares of Amazon.com debuted on the stock market in 1997 the usual way, via an initial public offering (IPO). The stock has split four times since then, with the last two splits occurring after Jan. 5, 1999. So had you hung on, your 12,000 shares would likely have split 2-for-1 in September 1999, becoming 24,000 shares – with their share prices reduced proportionately to result in the same total value. In June 2022, they would have split 20-for-1, turning into 480,000 shares (with the same total pre-split value). Today, with Amazon recently trading near $232 per share, 480,000 shares would be worth … more than $111 million! If Amazon’s shares had never split, they’d be too costly for most of us to buy.

Do you have a smart or regrettable investment move to share with us? Email it to TMFShare@fool.com.